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To: Joe Stocks who wrote (38535)	2/17/2002 9:56:39 PM
From: Larry S.	Read Replies (1) \| Respond to of 53068

"fiber swaps", creative accounting, and more than a bit of a sticky wicket, eh: story.news.yahoo.com

To: Joe Stocks who wrote (38535)	2/17/2002 11:01:59 PM
From: BWAC	Read Replies (1) \| Respond to of 53068

Joestocks, You are misapplying some theories. Current "debt" of $13 Billion includes such operating expenses as Account Payable, Royalties Payable, eg. all current operating items. Which are paid out of the cash flow of current revenue. Like Accounts Receivable? What you term as Current Debt is 99% the accrual of operating expenses which have yet to be matched to the revenue they produced. In fact only $48 MILLION is attributable to outright borrowed DEBT. About 3%. $23 Billion of long term debt does in fact exist. Of course $10 Billion of EBITDA exists as well. A whole lot of debt and interest can be supported on $10 Billion of EBITDA. Interest expense to service this debt is $1.37 Billion per year. A 7:1 coverage ratio. Goodwill and intangible seem to interest you as being useless. Whatever. In AOL's case they could be seen to skew the debt/equity ratio. So eliminate the goodwill from the calculation. You have an adjusted ratio of Debt 23/ Equity 24 (152 Book Equity - 128 Goodwill). Essentially a 1:1 ratio. Hardly indicative of a coming trainwreck. Even eliminating all goodwill. As for Bertlesmann here is the "official" AOL statement: -------------------------------- 4. BERTELSMANN AG ALLIANCE In March 2000, America Online and Bertelsmann AG announced a global alliance to expand the distribution of Bertelsmann's media content and electronic commerce properties over America Online's interactive brands worldwide. America Online and Bertelsmann also announced an agreement to restructure their interests in the AOL Europe and AOL Australia joint ventures. This restructuring consists of a put and call arrangement under which the Company may purchase or be required to purchase, in two installments beginning in January 2002, Bertelsmann's 49.5% interest in AOL Europe for consideration ranging from $6.75 billion to $8.25 billion. On March 30, 2001, AOL Time Warner and Bertelsmann agreed that, if Bertelsmann exercises its put right, $2.5 billion of the consideration would be paid in cash, with the remainder payable at AOL Time Warner's option in cash, AOL Time Warner stock or a combination of cash and stock. AOL Time Warner believes it will have adequate resources from its cash reserves or from accessing its committed bank facilities, commercial paper markets or capital markets to make any payments it is required or chooses to make in cash upon exercise of a put or call right. Recently, AOL Time Warner received non-binding notification from Bertelsmann that it was probable that Bertelsmann would exercise the first installment of the put arrangement between December 15, 2001 and January 15, 2002. ------------------------------------ "What "formula" do you use to calculate a $125 market cap? " I guess 12 times EBITDA would be a good start. Especially since it is increasing year after year. Currently at a 15% rate. Or you could value AOL based on sales. Is 3X sales too much? Or you could try to assign some asset values to the individual components of AOL. A few 10 Billion for Time Warner Cable. A few 10 Billion for AOL. Some value for HBO. Some for CNN et al. Some for WB Network. Some for Warner Music. Some for the Film Division. Some for Roadrunner. Some for the Braves. Some for TBS. Some for TNT. Some for the Hawks. Some for Six Flags. Some for the Publishing Division, which includes top three publications in terms of advertising revenue in 2001 - People, Sports Illustrated and Time; and Time Warner Book Group had a record 39 New York Times bestsellers during 2001. Some for a few hundred other assets or media outlets that I'm too tired to list. I mean where do you want to start? In AOL, you have the predominate advertising media movie online book magazine news theme park baseball playing news generator of revenue and cash flow that exists. If you turned it on, read it, or watched it today then AOL probably owned it and recieved advertising revenue. AOL could conceivably have had a family's eyeballs for essentially a whole leisurely rainy winter Sunday afternoon and evening. Watch some quick noon news on CNN on Time Warner Cable system, check email on AOL, watch the Daytona 500 on TNT til 5pm, settle in for family time, wife reading Southern Living magazine, kids reading Sports Illustrated, me reading This Old House magazine, all fading into the evening HBO movie, while the kids quietly enjoy the Cartoon Network and listen to downloaded music using Roadrunner. All AOL owned. All day. Touching every part of one's "media related" life. So how do you value that? Is $125 Billion really too much?

To: Joe Stocks who wrote (38535)	2/19/2002 1:23:40 PM
From: American Spirit	Read Replies (1) \| Respond to of 53068

AOL - You ignore 12 billion in liquid investment assets. I see only 20 billion longterm debt. Your biggest omission is in the intangible value of name brands and copyrights. The world's largest media company has more value there than perhaps any other company in the world. What, for instance is the copyright value of LORD OF THE RINGS worth? Well, they don't pocket it all but the trilogy and all the ancillaries will probably gross about 10 billion. That's just one piece of a huge library of value. It's the largest content library in the world. As for cash, you also ignore cash-flow, which is extremely healthy with Warner Brothers and the AOL ISP divisions. They also dominate in cable TV and get a big chunk of that $45 a month many of us pay. HBO is also a very healthy division. Basically they dominate nearly every facet of world media as much as any conglomerate can. Clearly, AOL was overvalued a few months ago. But at this price it's a very good long-term hold without muck risk. The whole market is edgy now so everything seems unsafe but I would feel confident buying here and holding.